CONCOR reckons that the Cabinet approved lower land lease charges of 1.5 percent a year on the market value of industrial land, with annual escalation of 6 percent, cannot be taken as the “right substitution” for comparing the land lease regime that is more favourable and beneficial to the firm.
Container Corporation of India Ltd (CONCOR) will “take a considered call” on migrating the 26 terminals it runs on Indian Railways land to the new lease regime cleared by the Union Cabinet in September after the Ministry of Railways issue guidelines on how the bid terms will be structured, a company official has said.
The State-run rail hauler currently pays land lease charges at the rate of 6 percent per annum on the market value of industrial land with annual escalation of 7 percent, for terminals run on Railways land.
The Cabinet decided that the land lease charges will be levied at 1.5 percent of the market value of land per annum with annual escalation of 6 percent.
The terminals now operating on Indian Railways land will have to go through a tendering process to avail the benefit of lower lease charges, in which the existing operator will have a so-called right of first refusal if it is not the highest bidder.
CONCOR currently runs 61 inland container depots (ICDs) of which 26 terminals are built on land leased from Indian Railways (IR). These 26 terminals account for more than half of the annual revenue of the company.
CONCOR reckons that the Cabinet approved lower land lease charges of 1.5 percent a year on the market value of industrial land, with annual escalation of 6 percent, cannot be taken as the “right substitution” for comparing the land licensing regime that is more favourable and beneficial to the firm ahead of taking a call to shift.
“This 1.5 percent (land lease charges) is not the right substitution. The 1.5 percent is only the fixed part of what they (Cabinet) have discussed in that policy. There is another part, that is the variable part, that is the TAC (terminal access charge). So, the total will come to 1.5 percent fixed plus the TAC which the Railways fixes, and the onus lies with the Railways to revise it as and when they wish to. That is a very catchy situation. Right now, the policy details have to come up and the company is looking into it, and we will take a considered call at a later date,” Manoj Kumar Dubey, Director, Finance, CONCOR, told analysts during an earnings call on 11 November after the firm declared the second quarter results.
CONCOR’s game plan on whether to shift to the new land lease regime or continue under the existing arrangement is being keenly watched as the government braces up to start the privatisation process of India’s biggest rail operator.
This is because, once the terminals move into the new land licensing regime, they will be covered under the PM Gati Shakti cargo terminals policy for railways which treats all such cargo terminals built on Indian Railways land, either partly or fully on Railways land, as common user facilities.
“The important issue here is, can CONCOR being a public sector undertaking say no to the Gati Shakti policy which is so dear to the Prime Minister Narendra Modi,” said an industry executive tracking the development.
With the new land lease charges set at 1.5 percent of the market value of industrial land, it is anticipated that the tender to migrate to the new regime will be decided on the revenue share placed by the bidders on the TAC portion.
“The bidding parameter is perhaps on the TAC portion only, but the rider is that this TAC portion is not having any clarity about the future. Today, say it is Rs1.6 lakhs per rake, tomorrow what rate will be there from the Railways side nobody knows. So, (whether) the parameter will be in terms of the percentage of the Railways rate or Rs1.6 lakhs as a fixed cost, nobody is aware right now. Let the details come out from the Railways side on the policy. If it comes, then we will also be participating in greenfield projects,” Dubey said.
If CONCOR wishes to continue under the existing land licensing regime for the next 35 years, there is no hindrance in that, Dubey added.
CONCOR is expected to pay land lease charges of Rs380-390 crore for FY23 though it has estimated the payout at Rs450 crore for the full year.
“In the first half of FY23, we made a payment of around Rs190 crore as land license fee. Even though we have given an estimate for the total year (that) the land license fee will be Rs450 crores, that additional Rs60-70 crores is towards the adjustments which we may have done because the land rates are fixed by the revenue authorities once in six months. So, to cater to these exigencies, we have taken the estimate at Rs450 crores. Now we are very clear and confident that the land license fee payment for the Railway land will be not more than Rs450 crores,” said V Kalyana Rama, Chairman and Managing Director, CONCOR.
